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COVID – a preview of the retail service model future?

by Robin Ferraby

19th May 2020

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Consumers have no choice. Now there’s a phrase to conjure with… but it accurately reflects the unprecedented predicament we find ourselves in. Consumer choice has been a guiding retail principle for decades, but recently much of the world has had no choice but to buy online for everything except supermarket essentials.

Where then does this leave global retail, which along with work, wellness and leisure is a cornerstone of our forward thinking on COVID-19 and its implications for technology development? The pandemic is giving us a preview of a future when brands will prioritise their digital interactions with consumers regardless of their traditional distribution channels.

As the situation eases, our lives will go back to something approaching what used to be considered normal. The online shopping experience is newer to some than others, but much of the enforced behaviour will be retained by all – accelerating pre-pandemic tendencies. The influential trends of personalisation and the growth of e-commerce that were already in place will ensure that digital interactions with consumers will be vital for every brand.

Right now, COVID-19 is having a profound effect on retail channels with online surging to new heights as physical retail suffers. According to Business Insider, one third of the planet’s population is under some form of social restriction. This has created numbers that speak for themselves. Data from IMRG revealed a 22% increase in online retail sales for the first week of April in the UK compared to last year. This rise was especially evident in certain categories: beauty increased by nearly 140%, electricals rose 90% and home and garden by 70%.

In the US and Canada, the numbers were even more startling. Online orders from bricks and mortar-based retailers were up 56% for the two weeks ending April 4 compared to last year, and up 52% for online-based retailers, according to the Emarsys/GoodData tracker.

Personalised customer engagement

But back to my key point: the explosion of online sales we are seeing is essentially a preview of what we were going to see anyway... just a little later down the road. The question now is how should brands respond? It would be dangerous for them to assume that their best course of action is to transfer their traditional methods to the online environment. This would be a risky move, given that no-one can see or touch their products and price is routinely under pressure from both super large brands and super small distributors. A possible answer is to instead switch to a service model enriched by personalised customer engagement. This is their most fertile ground now that consumers are being forced to withdraw from their addiction to visiting stores, and an opportunity to move to higher value experience solutions.

If they want to leverage success in this new digital space, what learnings should consumer brands be taking away from the current situation? At the most basic level is the need to create an effective ecommerce and digital engagement platform in the first place. One retailer, Primark UK, has followed a physical-only retail strategy to reduce costs and compete on price. Is that position tenable as consumers increasingly turn to online channels?

Consumer brands will urgently need to consider the sophistication of their overall offering, and how it blends with all-important consumer experience. This is another reason why I place such great importance on moving to new business models that support the transition from selling a product to providing a service as a means to differentiate, which is certainly attractive from a lifetime value and customer retention perspective. The ability to personalise a product and service offering is a huge opportunity for brands to stand out and gain crucial competitive edge.

There’s a chewy conundrum around services though. In the digital world they are more complex, in that the minimum viable product (MVP) for a service to an individual/customer will involve much faster-moving engagement than with traditional off-the-shelf products. Smart thinking will be needed to enable a context that will ensure continuing relevance for a service proposition. How will it be possible to make it a viable proposition that continues to enrichen the relationship and service offering from insights gained through the continued interactions?

Innovative technology is needed

Some of these questions will be answered by the innovative technology solutions that will be necessary to thrive in the new digital retail environment. For example, advanced sensing such as machine vision has the potential to gather the crucial data that can deliver the insight that underpins live service design. Explainable AI not only makes sense of the data but helps enable rich customer interaction with a solution. The lower communication latency in AI at the edge can deliver the level of touchpoint responsiveness in a solution that ‘feels natural’ – and natural interface makes for human-like engagement.

Data analytics with low-cost sensing and augmented reality can take user instruction to the next level, providing continuous feedback to guarantee a great experience at home in a way that instructional online content and in store training simply can’t. That, combined with a connection to experts and experience curators, makes for a different level of experience.

In the case of formulation products, a physical device with tight digital integration becomes an important enabler for a personalised experience. It allows dose and composition to be precisely controlled at the point of dispense; provides a platform for sensing to gather the data required to improve the service; and provides a touchpoint to allow the brand to engage with the consumer.

Iterate to accelerate

In my view, artificial intelligence has a huge role to play for brands that want to iterate to accelerate their customer engagement. AI will be increasingly used to spot trends and suggest improvements and product changes that enhance the service model and keep the brand ahead of the game.

It’s safe to predict that COVID-19 will be responsible for accelerating technology adoption as part of a differentiation strategy. The key will be not just having the data from insights gained – but understanding how to leverage it to enhance consumer experience. Technology is the only way to achieve this fast enough to maintain market share and position.

A final thought for now: as well as presenting challenges, the current crisis provides an opportunity to seize the moment, by engaging with customers more meaningfully than ever before and building future value.

Here at Cambridge Consultants, we’re busy collaborating with clients and colleagues on the technology solutions coming under increasing spotlight as a result of COVID-19. If you’d like to talk through the implications playing out in your space, do please get in touch. I’d be happy to talk through any aspect of the challenges and opportunities in more detail.

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